The constrained supplies of refined fuels are showing up in prices, with Singapore gasoil ending at $155.15 a barrel on Monday, up 70% from where it was — $91.42 — on February 27, the day before the Iran war started.
The profit margin for a typical Singapore refinery to produce a barrel of gasoil ended at $67.93 on Monday, three times more than the $21.90 that prevailed on February 27.
Gasoline shows a similar dynamic, with the profit for making a barrel of the light motor fuel ending last week at $27.47, more than three times the $8.00 from the day before the conflict started.
The wide margins for producing light and middle distillates do raise some questions about the market's dynamics.
The main question is why are Gulf producers running risks in shipping crude through both the Strait of Hormuz and the Bab el-Mandeb waterway when they could make vastly more money moving refined products?
Exports of light and middle distillates from the Middle East are estimated by Kpler at 2.14 million bpd in August, down from 2.58 million bpd in July.
They are also 55% below the 4.49 million bpd average for the three months to the end of February.
In effect, Asia's imports of light and middle distillates are down by about 2 million bpd, reflecting almost exactly the loss of supply from the Middle East.
The initial phases of the Iran war did see Tehran attack refining sites across the Gulf, but much of the damage has been repaired, although some capacity remains offline.
But it is likely that Saudi Arabia and the United Arab Emirates have the refining capacity available to produce fuels that are needed in Asia.
The problem may lie in the lack of available vessels to transport products and the difficulty in doing ship-to-ship transfers, assuming you can get the fuel out of the Strait of Hormuz without being attacked by Iranian missiles or drones.
But the one thing that the Iran conflict has reinforced is that the oil market is remarkably adept at adapting to challenging circumstances.
If Middle East producers can pivot to exporting more fuels, that would go some way to alleviating the stress in refined products markets and the risk of serious economic damage from high prices and constrained supply.
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